Phoenixville man allegedly used money meant for stocks on $4M beach house

PHOENIXVILLE — A borough businessman has been charged with mail, loan and wire fraud after he allegedly used funds given to him by investors seeking to purchase Facebook stock and instead purchased a $4 million home in Avalon, N.J., and a Conshohocken office building.

According to a press release from the U.S. Attorney, Eastern District of Pennsylvania, Timothy D. Burns, 33, of Phoenixville, owner of ESG Family Services among other businesses, allegedly told clients that he could purchase stock in Facebook and Twitter before the stock went public in 2011.

“Some of defendant Timothy D. Burns’ friends and clients learned that a large financial services company planned to purchase and sell off shares of Facebook prior to any public offering of the stock,” according to court documents. But that company withdrew from brokering the stock sales.

When Burns learned the brokerage firm backed out of the sales, he allegedly offered to make the stock purchases for some of his clients, according to court documents. Burns’ businesses offered bill paying and concierge services to wealthy individuals as well as financial management services.

Burns planned to make a profit off the stock sales by charging fees for the sales, taking a percentage of the shares’ growth in value for two years after the trade, and making his own purchases of social media stock, according to court documents.

Fifty would-be investors gave Burns $13 million to purchase the Facebook shares by March 2011. Burns had originally negotiated to buy 500,000 shares from a person referred to as “D.W.,” reportedly a Facebook employee, at a cost of $27 each, but the stock deal fell through on March 21, 2011, when D.W. “changed his mind and walked away from the deal.”

Burns then was offered to negotiate for 2 million shares in Facebook for $27 per share by an Internet intermediary. Burns was told a man named Ken Dennis controlled the shares. Dennis later turned out to be a pseudonym for a man named in court documents only as “T.S.”

T.S. told Burns that for an advance fee of $11.2 million Burns could buy the shares. Before the stock deal closed, however, Burns allegedly took money entrusted to him for the purchase to buy a $4 million beach house on Pelican Drive in Avalon, make a down payment on a commercial office building at 125 E. Elm St. in Conshohocken, and fraudulently obtained a $6 million mortgage loan on that same office building from Bancorp Bank. He also used the beach house as collateral for a $1.5 million loan from Bancorp for purchase of the Conshohocken office building, according to court documents.

Burns allegedly told Bancorp when he applied for the loans that he had made $20 million on Facebook stock deals, $8.6 million of which was his personal profit from the transaction, according to court documents.

Burns later learned that T.S. had absconded with the $11.2 million advance meant for the purchase of Facebook shares.

The U.S. Attorney has called for Burns to forfeit all property traceable to the funds meant for the Facebook shares, including the home in Avalon, the office building in Conshohocken and property at 26 Meredith Road in Phoenixville, as well as personal property.

Burns was charged Wednesday with one count of mail fraud, one count of wire fraud and two counts of loan fraud. If convicted, he faces a possible maximum sentence of 100 years in prison, a $2.5 million fine, five years of court supervision should he be released early from prison, and must pay a $400 special assessment and $20 million in restitution.

The case was investigated by the Federal Bureau of Investigation and the United States Postal Inspection Service. It is being prosecuted by Assistant United States Attorney Pamela Foa in the U.S. District Court for the Eastern District of Pennsylvania in Philadelphia.